Margaret Tahyar offers a concise analysis of key provisions of Senator Dodd's Restoring American Financial Stability Act of 2009.
The project of federalizing major elements of our corporate governance and executive compensation processes continues apace. The 1,136-page Restoring American Financial Stability Act of 2009, introduced last week by Senate Banking Committee Chairman Christopher Dodd, has principally attracted attention for its proposed radical overhaul of the regulation of financial institutions. But the Dodd bill also contains corporate governance and executive compensation provisions that would be applicable to all US public companies. The governance elements function as a somewhat more modest Version 2.0 of the universal governance mandates that had earlier been proposed in Senator Charles Schumer’s Shareholder Bill of Rights. The compensation elements are to a great extent lifted from legislation already passed by the House of Representatives this summer under the Corporate and Financial Institution Compensation Fairness Act of 2009. ...
The passage of the Dodd bill is highly uncertain, particularly in light of the sweeping impact of the balance of the bill. But the chances appear to be increasing that, in one form or another, Congress will act to strengthen the hand of the SEC and to convert a number of recent governance and compensation trends into permanent features of the landscape.
Jay Brown thinks the bill's regulatory provisions on executive compensation should be extended from financial institutions to all public corporations.
Nothing I've seen to date changes my mind that the creeping federalization of corporate governance is a very bad idea.
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